Can a Collection Agency Put Derogatory Information on My Credit Report?

If you fail to make a debt payment on time, your creditor will typically use in-house collection agents to contact you to make repayment arrangements. If the creditor's in-house efforts are unsuccessful, it may refer your account to an outside collection agency. The agency will continue collection efforts, and may report derogatory information to credit bureaus.

Late Payments

After your account has become more than 30 days past due, the collection agency handling your account may report a 30-day delinquency to TransUnion, Equifax and Experian, which are credit reporting bureaus in the United States. The collection agency may report additional delinquencies at 60, 90 and 120 days past-due. Payment delinquency reports can damage your credit score, making it difficult to obtain future loans.

Charge-Offs

After your account becomes severely delinquent -- usually six months or more -- your creditor may charge off your debt. This means that it considers your account bad debt for accounting purposes; however, it does not mean that the creditor or its collection agency relieves you of your obligation to repay the debt. The collection agency may report the charge-off to the credit bureaus, which lowers your credit score more dramatically than late payment reports.

Judgment

If you ignore the collection agency or make no effort to establish a repayment agreement, the collection agency may pursue legal action against you to recover the full amount of your debt. The collector files a civil lawsuit against you, usually in civil or district court and obtains a judgment against you. A legal judgment becomes part of your credit file and stays on your report for seven years after you pay off the debt or your state's statute of limitations expires.

Considerations

The transfer of a debt account to a collection agency does not automatically eliminate your options for repaying your debt and minimizing credit damage. The collection agency may work with you to establish a repayment plan that fits your budget. If you receive notification that your creditor has forwarded your account to a collection agency, call the collector immediately. The sooner you contact the collection agency, the more willing its agents will be to work with you.